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Capital Budgeting under Rationing: Comments on the Lusztig and Schwab Procedure

Published online by Cambridge University Press:  19 October 2009

G. A. Whitmore  and
Lloyd R. Amey
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Extract

The interdependence of the optimal investment program and capital prices, when capital and other markets are imperfect, has been one of the least tractable problems in capital budgeting. The nature of the problem is described in Amey [1]. Suggested solutions to the problem may be found in Baumol and Quandt [2], Carleton [3], Hirshleifer [4], Lusztig and Schwab [7], and Weingartner [9]. The purpose of this note is to extend the mathematical results reported by Lusztig and Schwab (L & S) and draw implications that will shed light on the controversy.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 8 , Issue 1 , January 1973 , pp. 127 - 135
Copyright
Copyright © School of Business Administration, University of Washington 1973

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References

[1]Amey, Lloyd R. “Interdependencies in Capital Budgeting: A Survey.” Journal of Business Finance, vol. 4 (1972), pp. 70–86.Google Scholar
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